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NGO raps govt on oil prices
May 31, 2005, Business Standard
CUTS for proactive competition commission
May 23, 2005, The Financial Express
Workshop on thrashing issues in power sector
May 21, 2005, HT Jaipur Live
Bill to protect children's rights welcomed
May 04, 2005, The Hindu

NGO hails move on children panel
May 04, 2005, HT Jaipur Live
Mehta on World Bank's Trade Policy Evaluation Advisory Panel
May 03, 2005
Competition goes hand in hand with globalisation
May 01 , 2005, HT Jaipur Live
Promotion of Competition - Necessary
May 01, 2005, Dainik Bhaskar
Competition necessary for utilisation of scarce resources
May 01, 2005, Rajasthan Patrika
Trade route to peace welcomed
April 19, 2005, The Hindu
Consumers to gain most from trade ties
April 19, 2005, Business Standard
TRAI flayed for promoting basic lines
April 17, 2005, Hindustan Times
Anti-competitive practices are rampant: CUTS
April 15, 2005, Financial Express
Crusade against adulteration, counterfeiting and spurious products
April 01, 2005, Kalantar
Level of Bacteria high in Medical Colleges
March 31, 2005, Sanmanoj
Govt policies lacking competitive edge
March 19, 2005, Times of India
'Let's have contest watchdog, too'
March 19, 2005, Hindustan Times
Need to keep a watch on competition in the market
March 19, 2005, Jansatta Express
Regulators need to be watchful
March 19, 2005, Hindustan
Ban on irrational use of drugs
March 15, 2005, Biswamitra
Country needs an expert to head competition commission
March 15, 2005, Indiantelevision.com Team
`Find best talent to head competition panel'

March 14, 2005, Business Line
Fairness in business competition
February 23, 2005, Vientiane Times
Plea to adopt VAT, promote Pvt sector

February 13, 2005, Hindustan Times
Tripartite civil society investigation into India-Brazil-South Africa agreement
February 16, 2005, Indo-Asian News Service
New effort to breathe life into SA-Brazil trade forum
February 16, 2005, Business Day

`Pay more attention to legal aspects of WTO issues'
February 02, 2005, Business Line
Experts seek changes to Competition Act
February 02, 2005, Business Line
An economist who judges competition
February 04, 2005, Business Standard
'Time right for competition policy'
February 02, 2005, Business Line
India consumer groups urge cartels action
February 01, 2005, Financial Times
‘Competition commission's autonomy hinges on funding’
February 02, 2005, Business Standard
‘A reason for resistance to competition bodies is lack of transparency and misuse of power’
February 01, 2005, Financial Express
Frame national competition policy, advice experts
February 01, 2005, Economic Times
Montek for clarity in regulatory framework
January 14, 2005, Business Standard
HIPC Completion Point In Sight But….
January 5, 2005, Zambia Daily Mai
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Archives

NGO raps govt on oil prices

MAY 31, 2005, Business Standard
New Delhi
Press Trust of India

Attacking the government for not being “transparent” in fixing petroleum prices, an NGO, Cuts, on Monday said the oil subsidy burden was “exaggerated” and there were “distortions” in calculating LPG and kerosene subsidies.

"The claim of huge subsidy burden on petroleum products and bleeding oil companies are exaggerated, and most of the burden is passed on to the consumers," Cuts Secretary General Pradeep Mehta said at a finance ministry meeting with various stakeholders to get inputs for preparing a roadmap for a new focused subsidy regime.

He said the government collects about Rs 6,000 crore as cess on domestically produced crude oil and bears an equal amount in the form of petroleum subsidies.

"Over the past three decades, the government has collected about Rs 50,000 crore as cess and almost all of it has gone to the coffers of the finance ministry. The cess amount now seems to be an implicit arrangement of meeting the petroleum subsidy burden," Mehta said.

The cess was introduced in mid-70s to provide financial assistance to state-owned companies.

Slamming too much intervention, Mehta said though the administered price mechanism was abolished in March 2002, the government continued to play a major role in determining prices of petroleum products and there was absolutely no transparency in their pricing.

He said even the method of calculating subsidies on LPG and kerosene was distorted, as it was based on import-parity pricing of petroleum products and not on the basis of unrecovered costs, which was the appropriate figure for calculating subsidy.

Moreover, this pricing system allowed oil companies to factor in Customs duty to arrive at the import parity prices, Cuts said.

Since the country does not import petrol or diesel but crude oil, the amount collected as notional customs duty, estimated at Rs 10,000 crore goes to bolster the financials of oil companies, he added.


CUTS for proactive competition commission
With globalisation, there’s need to tackle cross-border competition

May 23, 2005, The Financial Express
NEW DELHI
OUR ECONOMY BUREAU

The Competition Commission of India (CCI) needs to swing into action undertaking substantial capacity building to implement the extra-territorial jurisdiction that is embodied in the Competition Act 2002, according to a recent CUTS study.

As India integrates at a fast pace with the global economy, there is a need to ensure international co-operation to tackle cross-border competition challenges. Even though the Competition Act 2002 embodies the ‘effects’ doctrine, its implementation has been more or less ineffective, says the report.

Since 1990s, various sectoral regulators like those in power and telecommunications have been appointed to attract investment in various areas as well as ensure healthy competition. However, this augurs a conflict due to an overlap in competition policy. The fact that there have been hardly any problems so far is because the competition authority has been ineffective, the study says.

For instance, a plethora of other agencies apart from the CCI regulate mergers and acquisitions in India. These include the Telecom Regulatory Authority of India (Trai), electricity regulatory commissions, Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi), company benches of high courts etc. The CCI needs to build a proper co-ordination mechanism in order to make regulation effective. The government also needs to resolve the complexities that exist due to the inter-relationship between various government policies like the trade policy, industrial policy and regulatory reforms with the competition policy as a whole.

At the state level, there are five major policies that are responsible for nurturing anti-competitive practices, as per the study. These are the procurement policy, excise policy, truck operations, bid rigging in construction and retail services. This means that state level competition agencies backed by appropriate laws need to be constituted.

Apart from demolishing anti-competitive cartels, it is essential that the CCI takes up systemic consumer abuses which are rampant at the local level. This can also be done in collaboration with redressal agencies under COPRA which covers retail level competition issues, the study recommends.

Competition issues need to be addressed not only in the manufacturing sector but also in agriculture and services. It is common knowledge that there is a huge gap between the prices consumers pay and what the farmers actually receive because of the chain intermediaries. In order to provide more competition at the retail level, innovative marketing mechanisms like apni mandi and producer’s sales counters in consumer centres need to be promoted by the government and agriculture co-operatives.

As far as services are concerned, there are certain authorities that outrightly hamper healthy competition. For instance, in a case where the private sector comes forward to invest in ports, it is completely up to the port authority to allow or disallow competition. Likewise, even though the government has allowed private airlines to fly abroad the entry barriers are still high, the study points out.

Workshop on thrashing issues in power sector

May 21, 2005, Hindustan Times
Jaipur
HT Live Correspondent

On The Anvil

  • CUTS-FES to organize second phase of the ‘involvement of Consumers in powersector reforms project

  • The objective is to facilitate active involvement of the consumers in the power reforms

  • The World Bank identified this project as a model for wider dissemination

With a view to facilitate their effective participation in electricity regulation through building capacity on evolving issues in the power sector and to enhance the consumer voice, the Consumer Unity and Trust (CUTS) will organize a State-level orientation workshop from May 26.

The workshop will be a part of the second phase of involvement of Consumers in Power Sector Reforms Project. The workshop aims at imparting required skills to representatives of Consumer organisations.

CUTS and Friedrich Ebert Stiftung (FES) have jointly conceptualized and initiated this programme in the State in August 2001. in the project’s first phase, CUTS worked in six districts on pilot basis with the support of FES. The major objective of the programme among others, is to facilitate active involvement of consumers in the power sector reforms.

Delegates from various consumer groups from across the State and stakeholder groups such as Energy Department, Electricity Distribution Companies, Rjasthan Electricity Regulatory Commission) among others will take part in the workshop to be held at the Harish Chandra Mathur-Rajasthan Institute of Public Administration (HCM-RIPA).

Through the first phase, the effectiveness of the approach was tested on the ground. The second phase is as a result of the successful implementation and evaluation of the first phase with the involvement of all the stakeholders in the State. In the second phase of a series of activities will conducted across the State.

Based upon the feedback received from the programme, a replicable and sustainable model was developed, known as ‘CUTS-FES Model in the power Sector’. Lat year, the World Bank, under its Voice and Client Power Programme (VCPP), had identified this model as one of the successful interventions, and researched and documented the model for wider dissemination, a CUTS official said.

Bill to protect children's rights welcomed
Courts for speedy trial of crime against children proposed

May 04, 2005, The Hindu
Jaipur
Special Correspondent

The introduction of a Bill in the Lok Sabha the other day to facilitate the setting up of a national commission and State commissions for the protection of children’s rights has been welcomed by CUTS (Consumer Rights and Trust Society).

“If the introduction of the Commission for Protection of Child Rights Bill 2005” is an indication of the United Progressive Alliance Government’s commitment, then the commissions would be in place soon”.  CUTS noted in a statement here on Tuesday.  The State Governments should take immediate steps to constitute commissions and also to adopt their State-level Child Policy, it said.

The introudction of the Bill, pending from 2001, showed India’s committment to the United Nation’s Convention of Rights of the Child, ratified by it in 1992, CUTS pointed out.

The Bill would enable setting up of courts to carry out speedy trial of offences against children.  Such courts, separate from juvenile courts would come up in each district to look into cases of violation of child rights.

The Bill has provisions empowering  the Commissin to examine and review safeguards provided for protection of child rights and suggest measures for their effective implementation.  It will also look into factors that violate the rights of children affected by terrorism, communal violence, riots, natural diasters, domestic violence, HIV/AIDS, trafficking and any kind of exploitation.

CUTS noted that the proposed Commission is also empowered to probe matters relating to children with special needs, including children in distress, marginalised and disadvantaged children, children in conflict with law and children of prisoners.

NGO hails move on children panel

May 04, 2005, Hindustan Times
Jaipur
HT Live Correspondent

Consumer unity AND Trust Society, an NGO, has welcomed the Union government’s move to set up national and state commissions for the protection of children’s rights.

Introduction of the Commission for Protection of Child Rights Bill, 2005 in Lok Sabha (on May 2) is an indication of the UPA government’s commitment to constitute the commission pending from 2001, said a press release issued by the CUTS on Wednesday.

In the light of this Bill, the state government should take immediate steps in the direction of setting up the commission and adopt the state child policy soon, demanded by the NGO officials.

The bill provides for setting up of a children court in every district to enable speedy trail of offences against children.  These courts will be different from the juvenile courts. 

The commission will examine and review the safeguards provided for the protection of child rights and suggest measures for their effective implementation.  It will also look into the factors violating the rights of children, affected by terrorism and communal violence.

Competition goes hand in hand with globalisation

May 01, 2005, HT Jaipur Live
Jaipur

Promotion of Competition - Necessary

May 01 , 2005, Dainik Bhaskar
Jaipur

Competition necessary for utilisation of scarce resources

May 01, 2005, Rajasthan Patrika
Jaipur

Trade route to peace welcomed
"Consumers from both the countries would benefit"

April 19, 2005, The Hindu
New Delhi
Staff Reporter

The Consumer Unity & Trust Society (CUTS), a leading consumer group in India and working internationally, on Monday welcomed India and Pakistan's move to take trade route to peace.

"Boosting trade and investment across borders will be the most significant confidence building measures that the two countries are taking. Revival of the Joint Business Council should move forward to devise implementable actions so that consumers from both the countries benefit," said Pradeep S. Mehta, Secretary General of CUTS.

In a statement, he pointed out that at present, Pakistani consumers were paying huge prices for commodities like tea and automobile parts as they were imported from sources other than India. Similarly, Indian consumers would benefit from imports of textiles and handicrafts from Pakistan.

"Two countries should also explore complementarities in the production of specific items and the benefit of approaching the Central Asian markets jointly. India should look Pakistan as a transit to Central Asia, whereas Pakistan should use facilities in India to get better markets in South and South East Asia,'' he said.


Consumers to gain most from trade ties

April 19, 2005, Business Standard
New Delhi

Our Economy Bureau

“Since informal trade with Pakistan is more than the formal trade, any movement to get into formal and fair trade will benefit Pakistan's consumers and our exporters,” Prabir Sengupta, director, Indian Institute of Foreign Trade, said.

Sharing a similar view, Pradeep Mehta, secretary-general, Consumer Unity and Trust Society (CUTS) said, “At present, consumers in Pakistan are paying a huge price for commodities like tea and automobile parts, as they are imported from sources other than India.

Similarly, Indian consumers will benefit from the import of textiles and handicrafts from Pakistan.”

Nagesh Kumar, director-general, Research & Information Systems for non-aligned and other developing countries, said even the local industry in Pakistan also stood to benefit, as machinery like those required by the textiles sector was proving to be costlier to import as they were routed through a third country.

The Federation of Indian Chambers of commerce and Industry (Ficci) estimated bilateral trade at $200-250 million, while trade through a third country was estimated at $1 billion along with contraband trade of $1-2 billion. The revenue loss for India and Pakistan was estimated at $200-400 million.

Trade between the two countries has continued without any trade agreement since 1978. The last trade agreement was signed in 1975, which expired in 1978.

Between 1965 and 1975, there was no trade agreement between the two. Later, in accordance with the Simla Agreement, a protocol was signed in November 1974 providing the most favoured nation (MFN) status to be the basis for trade.

The two countries are exchanging concessions under the South Asia Preferential Trade Agreement (SAPTA). Under the first and second rounds of SAPTA, India granted tariff concessions on a total of 383 products at the six-digit level to Pakistan at a preferential rate of 10 per cent.

In return, India received tariff concession of 10 per cent on 265 products. In the third round, India granted 20 per cent tariff concession on 18 products while receiving concessions on an equal number of products.

The balance of trade has been in favour of India throughout since 1993-94 barring 1998-99 when it was in favour of Pakistan. Major items of import from Pakistan include fruits, nuts and pulses while major exports to Pakistan include items like plastics and pharmaceutical products.

On the issue of the most favoured nation status, Kumar said after the phased implementation of SAPTA from January 2006, the signatories to the agreement would in effect get the “most favoured nation” plus status.

“If that is on track, then the most favoured nation will become implicitly taken care of,” Kumar said.

Mehta said the two countries should explore ways of complementing one another in the production of specific items and the benefit of approaching the Central Asian markets jointly.

India should look to Pakistan as a transit corridor to Central Asia, whereas Pakistan should use facilities in India to get better markets in South and Southeast Asia, he added.


TRAI flayed for promoting basic lines

April 17, 2005, Hindustan Times
Jaipur

A CONSUMER SOCIETY, CUTS, stated that the Telecom Regulatory Authority of India’s (TRAI) decision to offer access deficit services (ADS) only to basic telecom services to promote universal access was unfair.

The society submitted a consultation paper on Interconnection Usage Charge Review (IUCR) to the authority. Drawing a comparison that mobile services have witnessed a growth of 55 per cent as against eight per cent in the basic phone segment, the society said that the consumers were preferring mobile phones to fixed ones.

Therefore, the CUTS submitted that offering incentives and perks in the form of ADC was an unfair decision on the part of the authority.

It may be mentioned there that the TRAI had enunciated the concept of ADC to support fixed line operators at a time when the fixed subscribers far exceeded mobile ones.

At that time, the authority recognising the fact that basic telecom providers had historically run a cross-subsidised system in which relatively high long-distance tariffs raked in surpluses, which were used to offset the losses because various items were priced below cost, Vinayak Pandey of CUTS, said.

With competition eroding fat margins in the long-distance segment, the cross-subsidy system could not continue to work. So, the TRAI imposed ADC to offset the gap between tariffs and costs.

He said that the TRAI should focus on achieving the objectives of universal access and universal service by giving equal emphasis on all telecom services, rather than being obsessed with basic telecom service.

The question here was to make telecom services more affordable, be it fixed or mobile service.

Assuming basic services can improve accessibility in rural areas nullifies the potential of mobile services, he said.


Anti-competitive practices are rampant: CUTS

April 15, 2005, Financial Express
New Delhi

Our Economy Bureau

To achieve a growth rate of 8%, the government must implement policies which are coherent with a singular goal of achieving a better market place, according to Consumer Unity and Trust Society (CUTS). It also points out that anti competitive business practices are rampant at the state level.

Incongruency can be seen in policies concerning the small scale reservations, the society adds.

"Closely linked with it are the state government procurement policies, under which both price and purchase prefernce are awarded to both small scale and other units," according to a CUTS publication.

It also says that no central law or authority can be used easily to curb anti-competitive practices which exist in the retail sector.

More importantly, a research conducted by the society shows that most private schools insist that students buy their uniform and stationery from either their own store or a nominated shop, where prices are usually higher and whenever a complaint is made, it is at the risk of the student being rusticated.

On the cable TV sector, CUTS notes that at the consumer level, one has to deal with monopolies, which do not guarantee good serive and escalate prices frequently. While Telecom Regulatory Authority of India (TRAI) is dealing with the policy framework, they too have been exasperated with the situation at the ground level, it says.

According to CUTS, there have been a large number of regulatory failures, which in turn have pulled down the growth momentum. It also says that there is corruption at every level.


Crusade against adulteration, counterfeiting and spurious products

April 01, 2005, Kalantar
Kolkata


Level of Bacteria high in Medical Colleges

March 31, 2005, Sanmanoj
Kolkata


Govt policies lacking competitive edge

March 19, 2005, Times of India
Lucknow
Times News Network


'Let's have contest watchdog, too'

March 19, 2005, Hindustan Times
Lucknow
HT Live Correspondent


Need to keep a watch on competition in the market

March 19, 2005, Jansatta Express
Lucknow


Regulators need to be watchful

March 19, 2005, Hindustan
Lucknow


Ban on irrational use of drugs

March 16, 2005, Biswamitra
Kolkata


Country needs an expert to head competition commission

Indiantelevision.com Team, 15 March 2005
New Delhi

On a day when the information and broadcasting minister was dwelling on the need to set up a regulatory body for the broadcast sector yesterday, experts felt that India needs to find the best talent to head the proposed Competition Commission and various regulatory agencies.

The reason for this, some Members of Parliament said at a seminar organised by consumer body CUTS, was the country has been "bogged down" with a petty issue of whether such bodies should be headed by retired persons from the judiciary or bureaucracy.

The seminar, attended by MPs and former central ministers like Yashwant Sinha, Dinesh Trivedi and Suresh Prabhu, was organised to discuss and debate the findings of a report recently brought out by CUTS titled `Towards a Functional Competition Policy.' The report identifies various competition abuses that undermine the economy, including those affecting the broadcast sector.

Initiating the discussion with reference to the current stalemate relating to the Competition Act, former finance minister Yashwant Sinha said it was a pity that such an important legislation has run into difficulties because of the petty issue as to who should head the proposed Commission.

Sinha further added that the country definitely needs a National Competition Policy to ensure a competition assessment of all government policies.

"Over the years, we have established several specialized regulatory agencies for various sectors. However, the issue of ensuring accountability of these agencies has not been addressed.

" There is need to establish a mechanism for effective parliamentary oversight of all the regulatory agencies. This also requires the need to develop an appropriate methodology to evaluate their performance," he added.

The Consumer Unity and Trust Society (CUTS) in a report released some time back while welcoming a competition law passed in 2002, which created the watchdog, had said it would be ineffective unless it was independent of government and endowed with the legal power to break up cartels.

In India, the report said, multimillion dollar industries such as steel, cable television, transportation, agriculture and drug retail remain insulated from competition and set prices above market
rates.

Taking the discussion further, Prabhu mentioned that the regulators were not born, and there is a need to develop appropriate mechanisms to ensure that strong regulators exist.

Trivedi warned that in the process of reforms, the country might convert public monopoly into private monopolies, leading to a worse situation. He emphasised that regulators and government policies should ensure appropriate level playing field for all.


`Find best talent to head competition panel'

March 14, 2005, Business Line
New Delhi
By Our Bureau

INDIA needs to find the best talent to head the Competition Commission and various economic regulatory agencies, according to several MPs, including Mr Dinesh Trivedi and Mr Suresh Prabhu, who expressed this sentiment at a seminar organised by CUTS International.

Initiating the discussion with reference to the current stalemate relating to the Competition Act, Mr Yashwant Sinha, former Finance Minister, said: "It is a pity that such an important legislation has run into difficulties because of the petty issue of who should head the commission."

He added: "The Competition Act 2002 could be the initial step towards developing a healthy competition regime in India. Deficiencies in the Act, could be removed by step-by-step amendments rather than blocking its implementation altogether."

Mr Sinha also said that the country definitely needs a National Competition Policy to ensure a competition assessment of all Government policies.

"Over the years, we have established several specialised regulatory agencies for various sectors. However, the issue of ensuring accountability of these agencies has not been addressed. There is need to establish a mechanism for effective Parliamentary oversight of all the regulatory agencies. This also requires the need to develop an appropriate methodology to evaluate their performance."

In the context of competition abuses that exist at the local level, Mr Sinha expressed doubts about the ability of the Competition Commission of India to deal with such issues.


Fairness in business competition

February 23, 2005, Vientiane Times
Vientiane

By Souknilundon Southivongnorath

The First National Reference Group Meeting took place in Vientiane yesterday to discuss business competition policy in developing countries.

"The meeting today brings local business representatives to share ideas, comments and contributions concerning the present competition scenario in Laos. Justice in business practices is a concern because some operations will be strong while others are weak," said National Economic Research Institute (NERI) Deputy Director, Dr Leeber Leebouapao.

NERI and the Consumer Unity and Trust Society cooperated to research the state of business competition in Laos and to identify areas of potential improvement.

"Now that the government is using standard marketing mechanisms in building its economy, the most important aspect is that competition be allowed on a free and fair basis. To guarantee healthy competition we need a policy framework to manage and provide fairness in business competition," Dr Leeber explained.

Current competition scenarios have been researched by NERI and then compared with government policies and laws. Their findings will be incorporated in a document for study by the government.

"The local business participants here today will brainstorm the document and we will then discuss it further and do more research into what should and should not be included in the document before handing it to the government," said Dr Leeber.

He said that the meeting would help to promote the idea of competition and would ultimately improve the quality of products manufactured and lower their price through the natural forces of competition, which would be of benefit to all consumers.


Plea to adopt VAT, promote Pvt sector

February 13, 2005, Hindustan Times
Jaipur

Advocating the State Government to adopt Value-Added Tax (VAT) as it was a step in the right direction, which would mobilize additional revenues, a consumer society suggested Chief Minister Vasundhara Raje to introduce fiscal discipline and management bill to establish necessary legislative framework for having better fiscal management.

Suggesting the same at a pre Budget meeting to Raje, the Consumer Unity and Trust Society (CUTS) stated that diminishing excise revenues in real terms was a cause for worry.  In this regard, the Government should learn from Andhra Pradesh and double its revenues by adopting a rationale excise policy.

CUTS General Secretary Pradeep Mehta said that the Government should hand-over certain services like hospitals, printing and publishing to the private sector.  This (of privatizing the same) should be done in a phased manner, he said, adding that allowing private sector a free hand without the required regulatory framework would be a ready recipe for a mess.

The Government, he suggested, should set up a State competition and regulatory agency for setting standards and enforcing them as well for expensive sub-standard services were costing consumers and the economy dear.  At the same time, it stated that private investment was one avenue, the Government could look at to ease out of its present fiscal stress, according to a Press statement issued here on Saturday.

In a pre-Budget memorandum submitted to the Chief Minister, Mehta said that the Government should productively use public money for developing priority areas like infrastructure and social capital.  Private investment should be attracted to allow competition for efficient service delivery, within the ambit of effective regulatory environment.


Tripartite civil society investigation into India-Brazil-South Africa agreement

February 16, 2005, Indo-Asian News Service
Johannesburg

By Fakir Hassen

Johannesburg, Nov 27 (IANS) Civil Society organisations in India, Brazil and South Africa are to conduct detailed research studies into the development of the India-Brazil-South Africa Trade Agreement that was mooted two years ago for establishing a new powerful economic bloc in the southern hemisphere.

This follows claims at a conference here by representatives of the private sectors in South Africa and Brazil that there is a lack of consultation by their governments in the IBSA process, even though Indian delegates felt this was not the case at home.

The conference was hosted by the South African Institute of International Affairs (SAIIA), which is the local partner in a research process into the IBSA agreement.  The lead partner in the process is the Indian organisation Consumer Unity and Trust Society (CUTS), while the Brazilian Institute for International Trade will take care of the third leg.

The three organisations will now agree on methodologies for conducting research in all three countries which will be shared with all the stakeholders in the IBSA process within a year. 

Each country will produce a paper which will incorporate a qualitative analysis of what would happen if they opened up their economies and a qualitative survey of the opinions of major stakeholders such as government, private sector and non-governmental organisations.

The issue of consultation between government and business is not a serious issue in India, according to Sheila Sudhakaran, Head of the Africa Division at the Federation of Indian Chambers of Commerce and Industry (FICCI).

“In India we are regularly consulted; the problem is now with the industry,” Sudhakaran told IANS.

“They are so slow in their response, and very confidential, especially in certain areas where competition is high, like the pharmaceutical sector. If you want to get feedback or inputs from them on the issues, what their predictions or forecasts are, they are not frank.  But once they are convinced about the intentions of the government; once the policy is clear; if they sense that there is business opportunity there, they come forward.”

James Lennox, the immediate past chief executive of the South African Chamber of Commerce, told IANS that the political mandates should be kept apart from the business objectives, as these often resulted in “unworkable trade agreements.”

“A good example of this is that we found out only at this forum that there is an inter-governmental transport forum, and yet business, which has logistical transport problems, is not aware of this forum.

“If we are to realise the potential of IBSA from an economic development point of view, we have to get rid of these hassles and avoidable cost, then I think it’s going to be successful.”

Lennox said Brazil was a difficult market for small medium size companies to enter for South African business, while India was seen as closer to what was being done here.

“In India we see the opportunities for trade growing, which is not necessarily dependent on a trade agreement.”

CUTS representative Pranav Kumar told IANS that it was too early to say whether IBSA would be successful.

“In my personal view, the priority in India is not IBSA but ASEAN and how to revive the SAARC.  IBSA is an infant in that sense. It is not even two years old. 

“But what we are trying to do is create an axis because these three countries are the really big economies of the southern hemisphere.  If we are successful in creating a nucleus in the three continents then other southern countries can also benefit from south-south trade and investment.”

The private sector in Brazil has also expressed concerns about not being consulted enough in the IBSA process, according to Mario Marconini, project director of the Institute for International Trade in Brazil.

“The criticism from the private sector is that government should not be subjecting its interests for political interests.  But I think IBSA can succeed. I think all three countries have their own strong reasons not to want to liberalize to each other because they compete on a number of products.  IBSA can mobilise the stakeholders in each of these countries - what they feel and want out of it; how they can be involved; and what the opportunities are.”

Commented Peter Draper of SAIAA: “Our scepticism around IBSA relates more to the trade aspect, which is not working so well, than the political aspect, which is working well. But we believe (those) obstacles can be overcome.”

IANS


New Effort to Breathe Life Into SA-Brazil Trade Forum

February 16, 2005, Business Day
Johannesburg
Carli Lourens

AGAINST the backdrop of rising concern that the India-Brazil-SA Forum (Ibsa) may become yet another failed attempt at boosting trade among developing countries, a fresh effort to prevent this was launched yesterday.

Research institutions from the three countries said they would analyse economic relations to identify opportunities for trade and investment among the Ibsa member countries in a new project.

Ibsa, a political and economic forum established by the three governments more than a year ago, had to convert from a politically driven talk shop into a swap shop if it were to succeed, warned Lyal White, senior researcher at the South African Institute of International Affairs.

In addition to the local institute, the project will be driven by Cuts Centre for International Trade Economics and Environment of India and the Institute for International Trade Negotiations of Brazil.

Trade between the three countries is low compared with their trade with rich countries, but project participants believe there is large scope for increased trade.

SA's trade with Brazil, for example, constitutes less than 2% of its total trade.

The three regional powers make up a market of more than 1,2-billion people with a combined gross domestic product of $1,1-trillion.

A recent report by the South African Institute of International Affairs states that the Ibsa agenda as formulated by the three governments is broad and ambitious, and proposed co-operation in a large number of areas such as defence, education, health, job creation. This raised concerns about the viability of the process, stated the report.

In addition, economist Stephen Gelb of the Edge Institute in SA yesterday said government had not engaged sufficiently with nongovernment bodies such as business and labour to take Ibsa forward.

Cuts representative Pranav Kumar said the project would aim to bring together business, civil and research organisations among others, with the objective of formulating a new action plan.

Lack of growth in South-South trade has been blamed partly on the fact that many of these countries produce similar products.

But Kumar said there were many complementary trade opportunities within Ibsa that could be explored, citing India's pharmaceutical sector, Brazil's fruit juice and SA's mining technology as examples.

Kumar said the one-year project, funded by the Swiss Agency for Development and Co-operation, would involve four case studies identifying possible exports and the effect on destination countries.


`Pay more attention to legal aspects of WTO issues'

February 14, 2005, Business Line
Kolkata
Our Bureau

WHILE the economic aspects of the World Trade Organisation (WTO) are frequently debated, the legal aspects do not get as much attention as they deserve, said Prof. B. S. Chimni, Vice-Chancellor of West Bengal National University of Juridical Sciences (WBNUJS).

Prof. Chimni was addressing a seminar on `Developing markets through competition for growth & equity,' organised jointly by WBNUJS, CUTS International and the Indian Chamber of Commerce here on Monday.

He emphasised on the need for law universities all over the country to take up in right earnest the study, research and dissemination of information on the legal aspects of WTO issues.

"We hope to fill the gap in WBNUJS, which has already set up a Centre for Studies in WTO Laws," he said.

With competition being a contentious issue at WTO, the professor called for a proper competition policy to outline relevant laws.

With the requirements of developed countries in this regard being very different from those of developing countries, he expressed doubts if the blind copying of western models without critical examination would serve any purpose.

Mr Justice Anirudh Bose of Calcutta High Court, in his keynote address, observed that the need for a competition policy is one of the paradoxes of the free economy, as State intervention would often be needed to keep markets free.

To what degree a corporation or an individual should be allowed to function in the market without any restriction and which of its actions would call for State intervention is essentially the task of an economist to decide.

Yet the locus standi of a member of the legal fraternity arose possibly because the controversy of monopoly necessarily involves the conflict of rights, which has to be resolved in the courts of law.

Mr Pradeep S. Mehta, Secretary General of CUTS International, said the country at the crossroads of implementing a new competition law.

Concerns, therefore, have been expressed over the lack of awareness about a competition policy. As anti-competitive practices pose a major challenge, he said that his organisation had undertaken a research project to develop a functional competition policy.

The project covers systematic as well as sectoral issues to assist the Union Government to come up with an "implementable" competition policy, he added.


Experts seek changes to Competition Act

February 02, 2005, Business Line
New Delhi
Our Bureau

The Government needs to make the necessary amendments in the Competition Act to get the Competition Commission of India (CCI) working on its agenda within a year, experts in the field of competition law have said at a conference organised by CUTS International.

These amendments should focus on the CCI's independence, autonomy and operability, the participants said while discussing the National Competition Policy Statement.

The National Competition Policy seeks to provide guidelines for different branches of government agencies to maintain the appropriate competition dimensions. Either the Planning Commission or the Department of Economic Affairs could be the forum to take up an assessment in this regard when any step or decision which will have an impact on the economy and consumers is to be taken, it said.

Taking up a pragmatic approach, the CCI should focus its advocacy agenda on business compliance education and consumer awareness.


An economist who judges competition

February 04, 2005, Business Standard

He is an economist and has no judicial background. But Frederic Jenny, 61, is a judge in his country’s apex court.

Jenny, who was in the capital for five days to attend a conference on competition policy, is a judge at Cour de Cassation, the French Supreme Court and sits in the chamber of commerce, economics and finance.

He is also the chairman of the OECD committee on competition law and policy.

The first time Jenny came to India was in the summer of 1966 as a student. Hitchhiking across Istanbul, Caspian Sea, Tehran, Kandahar and Lahore, he landed up at Amritsar before heading for Calcutta.

It was a short trip, he recalls, but the memories have stayed with him for long. His affair with India resumed seven years later when he took up a job for Paris Metro, an American newspaper based in France, as a journalist posted at Thiruvananthapuram.

Jenny is clearly excited about his latest trip to India as it coincided with the Supreme Court disposing of the petition challenging the validity of the Competition Commission.

“It’s a normal development,” Jenny says referring to the ongoing debate in India on who should head the commission: a judge or an expert in economics or business.

Over time, due to close interaction between the judiciary and economists in France, the regulatory system has developed a good understanding, he says.

Economists have started appreciating the procedural stuff and judges have realised that it is better to utilise the expertise of economists. They are quite happy to sit at the appellate level. Even in the US, there is a close relationship between lawyers and economists, he says.

Jenny has a lot of advice for the Competition Commission. The proof of whether a system is working well has to be backed by statistics, he says.

The French system, according to him, is working well as the commission there has taken good care of the “demonstration effect”. In about 30 per cent of the cases, the commission passes stiff orders.

While 80 per cent of these orders go into appeal, the French court of appeals on an average upholds 80 per cent of these orders. This gives a lot of credibility to the French competition authority.

Jenny explains how India with its federal structure can look at the EU model to implement its competition laws effectively. Technology and close interaction among EU countries is helping iron out issues related to implementing competition laws.

For example, as soon as any case involving more than one EU country comes up, it is put online and made available to authorities in all member-countries.

By exchanging the details of the cases, the problem of litigation in various jurisdictions can be avoided.

For example, when cases are filed in multiple locations, the EU Commission discusses them with members and the jurisdiction that is best equipped to handle the case finally takes it up.

The EU authority has the power to pull back the case and assign it to some other authority if it feels that the case is not being handled properly.

Jenny, who was the vice-chairman of the French Competition Authority before becoming a judge, has seen the French competition regulatory system evolve in the last three decades.

Going back to the early days of development of competition laws and their implementation in France, he points out that earlier the competition authority in France had only a recommendary role with the minister having power to make the decisions.

Things changed in 1986 when the system was amended and the competition authority received powers to make decisions with provision for appeal at the court of appeals.

While the authority has powers to summon people and ask for documents, it requests for warrants from the judicial authority when it comes to search and seizure.

On the issue of the competition authority’s independence, Jenny has the last word: “The key word is funding. No detail in the law can ensure independence. The bottom line is that the commission should not depend on the government for grants.”

Is the Indian government listening?


'Time right for competition policy'

February 02, 2005, Business Line
New Delhi

Our Bureau

IN the present liberalised regime the time is right to adopt a National Competition Policy, according to Dr Kirit Parikh, Member of the Planning Commission.

"Though India has had a long experience of a competition law, it has never had a competition policy to address the relevant issues in a systemic and comprehensive manner. It is now time to adopt a National Competition Policy," Dr Parikh said.

He was delivering the keynote address at an international conference `Moving the Competition Policy Agenda in India,' organised by CUTS International, a non-governmental organisation.

The conference was organised to release the project report on `Towards a Functional Competition Policy for India' undertaken by CUTS.

Dr Parikh also emphasised the need to introduce competition wherever possible, even in services provided by the government, free of cost or at highly subsidised rates.

Taking education, for example, he suggested that subsidies need not be given to the schools directly, rather students can be given vouchers which the schools should be able to encash.

This would provide incentives to the schools to improve quality and attract more students.


India consumer groups urge cartels action

February 01, 2005, Financial Times
New Delhi

India’s leading consumer rights group yesterday called on the government to give a new competition watchdog the power to attack several large cartels operating in the country.

The Consumer Unity and Trust Society (CUTS) in a report released yesterday welcomed a competition law passed in 2002 that created the watchdog, whose first probes into price fixing may begin next year.  However, the watchdog said it would be ineffective unless it was independent of government and endowed with the legal power to break up cartels.

The watchdog, although set up, has faced a series of legal challenges that have delayed its operations.  India’s Supreme Court recently cleared the last legal hurdles and a public debate over the watchdog’s role is under way.

Past attempts to promote competition have hit fierce opposition from cartels. In India, multimillion dollar indujstries such as steel, cable television, transportation, agriculture and drug retail remain insulated from competition and set prices above market rates, the report found.

Pradeep Mehta, secretary general of Cuts, said whihle cartels are illegal in India, many thrive because the current trade practices law is weak and hard to enforce.

The Cuts report claims, for example, that some popular drugs are costlier in India than in Canada and the UK because drug compaanies collude with doctors and pharmacists to raise profit margins.

Mr. Mehta said the most effective way to attack market collusion was to give the watchdog more powers and for New Delhi to adopt a comprehensive competition policy that spanned national and state boundaries, and made competition a principle of economic regulation.

But powerful business interests are likely to resist.  Some producer lobbies have already attacked the watchdog  to be called the Competition Commission of India, as a return, to the “licence Raj” of socialist-style government intervention.

There are signs that the bureaucracy, judiciary and govenment are closed to a rare consensus on the need for more competition to improve consumers’ welfare and reduce corruption.

As Mr. Mehta notes, competition in the telecommunications industry in the past four years means people no longer need to bribe bureaucrates to get a phone line.

“India does not have much experience with good competition regulations.  That is one of the challenges for the new Indian competition Commission.”  Said Frederic Jrnny,  Professor of Economics at France’s Essec business school and a world competition expert.


“Competition commission's autonomy hinges on funding”

February 02, 2005, Business Standard
New Delhi

Our Economy Bureau

Frederic Jenny, Judge at the French Supreme Court, today said funding would be the key issue for ensuring independence of the Competition Commission. “No amount of details in the law can ensure independence as ultimately it’s the resources which matter.” Jenny said at a conference here today on Moving the Competition Policy Agenda in India.

Jenny said the “battle for resources” was very important in this context and added as far as he could recollect, only Turkey had a system where the competition authority was not dependent on government grants but was funded by a tax on shares traded on the stock exchange.

The issue was raised by S. Chakravarthy, consultant on Competition Policy and Law and a former member of the Monopolistic and Restrictive Trade Practices Commission. He said that the commission’s independence could suffer as it would have to depend on government grants. “It’s an arm that can be twisted.” He said.

V.K.Dhall, member (Administration) of the Commission, however, refused to go into a debate on the issue of independence, and said the government should re-examine whether there was a need for a two-year transition period before corporate merger related cases could be taken up by the Commission.

International experts at the conference also felt that the transition provisions did not serve much purpose. “Nobody prepares for the law if there is no fear. “ Albert Heimler from the Italian Competition Authority said. Earlier in the conference, Kirit S. Parekh, member, Planning Commission, said that there was a need to introduce competition in services being provided by the government free of cost or at subsidised rates.

“Subsidies need not be given to the schools directly. Instead students can be given vouchers which the schools can encash. This would provide schools the incentive to improve quality and attract more students, “ he said emphasising the need for competition

“It is now time to adopt a National Competition Policy” Parekh said adding that India never had a Competition Policy to address relevant issues in a systemic and comprehensive manner. A draft Competition Policy prepared by a committee headed by S Sundar, fellow, The Energy and Resources Institute was also presented at the conference.


‘A reason for resistance to competition bodies is lack of transparency and misuse of power’

February 01, 2005, Financial Express

In Europe, a lot of issues which were dealt with by the government are now in the domain of a competition authority

Frederic Jenny is a class apart. A former vice-president of the French Competition Authority, and presently chairman of the OECD Committee on Competition Law and Policy, Dr Jenny has the unique distinction of being a judge in the French Supreme Court without a judicial background. But that, as he tells FE in an exclusive interview, should not really raise eyebrows because in today’s complex world, judges need to know much more than law alone. In India to attend a conference organised by the Jaipur-based CUTS, “Moving the Competition Policy Agenda in India” Dr Jenny spoke on competition and the lessons India can learn from experiences in the rest of the world. Excerpts:

In India we’ve had a raging debate on whether the Competition Commission must be headed by a judge and even now, after the Supreme Court ruling, the matter has not been settled. What is your opinion? How critical is a judicial background for such a body?
You do need to have a judicial background in principle. However, I don’t believe it is essential. Take my case. I am the first-ever economics professor to be appointed a judge of the highest court of law in France.

There is some relationship between the debate in India and France in this regard but it has taken a different form. What has happened in France and other European countries is that dereservation, globalisation along with opening up to competition have taken place. So, a lot of issues which were dealt with by government earlier are no longer within the ambit of the authorities. Initially, one needed government permission to set up an industry. Issues like petrol pricing, outsourcing, etc. have come within the judicial ambit. Judges themselves started questioning how apt the judiciary was to deal with these issues.

With reference to the competition law it is difficult to separate law from facts. Laws are usually written in a short phase and then it is up to the judge to interpret the law taking into account the relevant environment as to whether the sort of practice in question is permissible.

There are a number of different ways in which the magistrates can become competent in these matters. One is that they consult an expert body as in the United States. But the major flaw with this system is that if the judge does not know the right questions to ask, it can fail. Another way is to have a competition authority composed of judges and experts and this is the model followed in many parts of the world today.

In France the issue of whether the members of the commission need expertise in other areas became a focus of intense debate, particularly in the context of a number of socio-economic damage cases came up. It was in this context that I was selected through a long procedure of selection.

But does one need a separate body to ensure competition. Is it not enough to remove barriers to entry and then leave it to the market?
There are several ways of answering this question. In some sense national monopolies remain as in airlines, education, electricity, water distribution because there is no easy technology that is available as in the water distribution system. It is quite another matter in the case of telecom where, due to advances in technology, government participation has declined. The extent of government control varies from sector to sector. In some sectors where private players want to come in there is a need for a regulator to create an enabling environment so that they can set up business and eventually grow. A regulator is required depending on the network of competitors. In areas where it is useful to attract investment, regulation is justified.

How would you define the role of the Competition Commission?
A Competition Commission can either regulate, or look at a specific sector or both. In Australia, for instance, the competition authority has two divisions - a competition division and regulation division. In UK, however, each regulator enforces competition law in the sector concerned. In France there are two authorities. The regulator does not do competition work and makes limited decisions. The competition authority looks at the plans and what are the qualities of the firm entering. There is a division of labour between the two.

Which route should India take?
It should follow the one it wants to. Oh! I forgot! There is also a fourth model to the ones I mentioned earlier which operates in New Zealand where everything is done through the Competition Council and this has not been very successful because of the procedures and the unfamiliarity of judges with technicalities. The division of labour model, however, is the most common one.

As the trend of mergers and acquisitions grows worldwide are companies becoming inherently anti-competitive?
There are two possible answers to this. Sectors in which there is reason to believe economies of scale are required for efficiency expansion should not be curtailed. The benefit must be passed on to consumers. Size is not something to worry about, it is the abuse of power. Sometimes a big-sized company captures a limited market to the detriment of consumer interest. Take the case of Microsoft, which has captured the market due to its better products and innovation. It hasn’t grown through mergers. The fact that you have grown does not mean you are using invasive practices.

It is quite different when you absorb a competitor. In case the company going in for merger has a huge share in the market then a check should be made at the time of the merger. It must be found out whether there is good reason for the merger or that the company is doing it solely to eliminate competition. The latter is not good for the consumer. Mergers are permissible where there are good technical reasons for increase in size.

The Indian Competition Commission should not prevent mergers as a whole but prevent those which do not have a redeeming value as such. There are three kinds of markets - where entry is easy, where entry is not relatively free and where the market power of few firms serves as barriers to entry.

Our Competition Act bans cartels. But are cartels necessary anti-competitive?
They mostly are. In the US, forming cartels is a criminal offence and laws are severely enforced. Export cartels, however, are allowed so that small firms get access to international market. The government has to see whether private cartels are of any use to industry and the benefit can be passed onto the consumer. The role of the Competition Commission and the competition policy is that the benefits can be passed to the consumer. But it is very hard to see a case where a cartel would be justified. Government cartels like those on oil, rice, coffee and rubber are reasonable but not private ones as they have no role in policy. The WTO has done nothing to prevent government cartels.

If the benefits of competition are so widely recognised, what explains the opposition of developing countries to getting competition into the WTO?
Well I would think we need to decide whether they were opposed to the EU initiative because the way it was worded or because they lacked the ability to compete. There is also a lot of distrust on the part of developing countries in the WTO.

In India the government can remove any member of the Competition Commission and can even supersede the entire body. Your reactions?
Well, it’s not like that in France. There members are appointed to the Commission for a tenure of six years and cannot be removed from office. Independence is essential to the credibility of the Commission. There is a need for an independent commission as the government being a big actor economically may not have views which are neutral. Secondly, transparency is important in transforming the economy. There must also be transparency in the decision-making process which should be accessible to the press and the public.

One of the reasons for resistance to competition bodies in the developing countries is lack of transparency and misuse of power. If there is no transparency the government can overrule decisions and exercise control by squeezing the budget of the commission.


Frame national competition policy, advice experts

February 01, 2005, Economic Times

It is time for India to adopt a National Competition Policy, particularly in the present liberalised regime, said Planning Commission member Kirit Parikh, delivering the keynote address at a conference, “Moving the Competition Policy Agenda in India”, organised by CUTS International here in the Capital today.

Among the 100-odd foreign delegates was Dr. Frederic Jenny, Judge in the French Supreme Court.  His presence is of particular interest to Indians, owing to the turf battle between the judiciary and the bureaucracy that has held up constitution of the Competition Commission in India.

Dr. Jenny is a PhD in economics from Harvard and served as vice-chairman of the French Competition  Authority.  “I was chairman of one of the three sub-committees of the competition authority,” Dr. Jenny told ET, “and that panel included some judges, apart from others.  And since I was interested in ensuring that the competition authority produced rulings that would be upheld by the courts when challenged.  I held a series of seminars for lawyers and judges, for my clarity on legal procedures and the legal fraternity’s clarity on competition matters.  Now, the French legal system is such that it is not easy to introduce economic experts as witnesses to testify on a matter.  So some of the judges thought, why not draw the needed economic expertise on to the bench itself?  Under a law passed some 10 years ago, the French judiciary could induct a non-legal person on to the bench and they decided to use that provision to have be on as a judge. “

The French judicial system is different from India’s in things other than caste-exclusivity for the judiciary over all adjudicatiion functions.  The French supreme court has separate chambers for criminal cases, civil cases and for cases relating to commerce, economics and finance, allowing for specialisation and expertise among the higher judiciary.

The conference is being organised to release the project report on “Towards a Functional Competition Policy for India” undertaken by CUTS.  Dr.Parikh also emphasized the need for introducing competition wherever possible, even in services provided by the government, free of cost or at highly subsidized rates.  Taking the example of education, he suggested that subsidies need not be given to the schools directly, rather students can be given vouchers, which the schools should be able to encash.  This would provide incentives to the schools to improve quality and attract more students in order to get more vouchers.

Mr.V.K. Dhall, member, Competition Commission of India, noted that India is possibly the only7 major country, which does not have a functional competition authority.  This situation, however, has been created by the Supreme Court case, which would now require amendments in the competition law.  This might further delay the process.  Nevertheless, the CCI is engaged in advocacy and capacity building activities, including commissioning various research studies to understand the competition problems in the country.  This would help in effective implementation of the law, whenever it becomes operational.   


Regulatory structure needs clarity: Montek

January 14, 2005, Business Standard
New Delhi

Our Economy Bureau

Lack of clarity in legislation was the major problem facing the regulatory structure in India, Montek Singh Ahluwalia, deputy chairman, Planning Commission, said today. Another critical issue, according to him, was who among independent regulators should be accountable.

“Even with a first-class regulatory system, we need much greater clarity on government policy. For instance, the terms on which public sector incumbents are to be subjected to competition needs to be spelled out," Ahluwalia said at a seminar on Regulatory Framework for Infrastructure Sector in India jointly organised by the Planning Commission and CUTS Society.

Protection of consumer interest was a desired objective, but there was enormous resistance in India to having a regulator in a sector which had a government monopoly, Ahluwalia admitted.

Both the previous and the present Planning Commission were in favour of a tariff regulatory authority for the Railways to ensure that consumers were charged reasonable charges and cross subsidies were not built into policy.

The proposal had, however, been opposed, he said. Cross subsidy in the power sector leads to tax on a particular category on consumers and there was a case for doing it transparently, by specifying a limit to the extent to which a segment could be taxed to facilitate subsidisation of another.

The Planning Commission was working on a paper to suggest changes in the regulatory structure in India and it would be firmly grounded in international experience, he said.

The quality of people working as regulators was also important. There was a case for paying them higher salaries or allowing government officials the flexibility in terms of job prospects to ensure that only the best were hired.

"This is important as the regulator will have to keep a step ahead of industry players," Ahluwalia added.

Speaking at the inaugural session, Scott Jacobs of Jacobs and Associates, said that there were large gaps between regulatory practices in utility sectors in East Asian countries and what was considered good practice in OECD (Organisation for Economic Co-operation and Development) countries. Governance needed to be given priority because the present regulations discourage private investment.

Among the major problems faced by regulators were a weak commitment to market reforms by Asian governments, hostile policy environment for good regulation and undeveloped institutional capacities in the regulatory sector, he said.

The high levels of poverty and low consumer capacity to finance investment in infrastructure made the job of regulators difficult. In addition, the separation between operation and regulation and that between promotion and privatisation was not always clear, he pointed out.

In a third of the 22 East Asian utility regulators covered in an ADB report, incumbent firms had regulatory authority. Regulators also had incoherent policy goals. For instance, they had to protect jobs and decrease consumer prices at the same time.


HIPC Completion Point In Sight But….

January 5, 2005, Zambia Daily Mail
Zambia

FROM the time Zambia qualified for the Highly Indebted Poor Countries Initiative (HIPC) in 2000, all efforts and programme by Government have been centred around the HIPC agenda.  Recently in Lusaka, the Consumer Unity & Trust Society-Africa Resource Centre (CUTS-ARC), in partnership with the Southern Africa Regional Poverty Network (SARPN) organised a one-day stakeholders’ roundtable discussion. Our staffer Nancy Mwape, who sat through the discussion, now reports.

ZAMBIA is this year expected to qualify for the HIPC completion point where the International Monetary Fund (IMF) will cancel US$3.8bn out of the country's total external debt of US$6.8bn.

However, even after the HIPC completion point, the country’s poverty reduction strategy paper (PRSP) will have to go on until poverty is eventually eradicated. This means that a poverty reduction programme will have to exist as part of the country’s economic structure.

On December 16, 2004, the IMF executive board completed their first review of Zambia’s economic performance under a three year Poverty Reduction Growth Facility (PRGF) arrangement, which was approved on June 16, 2004.

The country has made progress toward meeting the triggers for HIPC initiative completion point and could reach it at the time of the second review under the PRGF arrangements based on performance through the end of 2004.

The nation can only qualify for HIPC provided that performance under the PRGF supported programmes remains strong and implementation of the poverty reduction strategy is satisfactory.

IMF deputy managing director, Takatoshi Kato says Zambia's performance is particularly encouraging against the backdrop of the economic decline in the preceding two decades.

Kato, nevertheless, states that Zambia still faces significant challenges such as not strong enough growth to make large inroads into widespread poverty, high inflation, even though progress was made in this area in 2004.

Professor of Economics Venkatesh Seshamani, University of' Zambia, speaking at the round table discussion in Lusaka, questioned whether HIPC is a panacea or old wine in new bottles to debt sustainability, or debt sustainability a myth.

Prof Seshamani stated that at no point did anyone say anything about HIPC being a Panacea, but notes that according to the World Bank, HIPC will make very little difference on the release of new financial resources development.

Jubilee Zambia says it is sure of Zambia reaching its completion point sometime in May or June this year. Jubilee Zambia policy analyst, Jack Zulu, pointed out that consistent failures of HIPC meant that it is not the best response to the debt issue.

Zulu said eight years along the way, HIPC has brought only seven out of' 42 countries’ highly-debted nations to something close to sustainability and therefore needs to be assessed in the right context.

"Uganda had reached HIPC completion point three times in the past and each time it was extended. Ethiopia too has reached the HIPC completion point but its debt will not be sustainable until after 2020," he said.

Zulu said HIPC has failed to respond adequately to the debt problem of poor countries because it relies on export-driven growth to calculate debt sustainability, whereas growth, although necessary, has no impact on the poor.

He added that what Zambia needs is a broad based growth as the HIPC initiative only opens up the process in which government contracts new loans without a debt repayment plan.

Zambia has, anyhow, made considerable progress on HIPC   benchmarks. Commercialisation of' Zesco is on course. Government has increased discretionary

budget share to education to 20.5 percent from 18 percent and has issued bidding documents for the sale of Zambia National Commercial Bank.

A bulk of debt relief assistance under the enhanced HIPC initiative is expected, when at completion point the country satisfies a number of specified conditions.

These   include commitment to PRGF and the International Development Association's structural adjustment loans and confirmation of participation of other creditors in the debt relief operation.

International Economic Relations Professor, Oliver Saasa, noted that answers to problems facing the country should be inward-looking and not outward.  "We need the right institutions and the requisite personnel at national level, otherwise we can easily become a country of complainers. What is required is both an aid policy and a debt policy," he said.

The Professor further questioned the wisdom of asking the bank to design the business plan and debt policy for the country, when it was actually a client of the bank.

Prof. Saasa, on the other hand, noted that the only thing that will improve after HIPC is the credit worthiness of Zambia.  He added that HIPC does not provide any resources for development and called on the need to improve capacities, both institutional and human, in order to reduce poverty.

The discussants at the end urged Government to be empowered so that it can say no to bad aid. They further stated that the poor are homogenous, thus the need for minimum empowerment levels. As much as it is known by the government that HIPC initiative is not a panacea to debt sustainability, HIPC achievement will reduce government burden of debt servicing.

After the HIPC completion point, the country will need a locally developed strategy as an alternative to foreign constituted strategies.

Government will also need right negotiators with capacity to analyse all issues given to them by the international community.


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